Reference no: EM132501913

The controller of Rather Production has collected the following monthly expense data for analyzing the cost behavior of electricity costs.

Total  Electricity CostsTotal

Machine Hours

January$2,500         300

February3,000                    350

March3,600                    500

April4,500                          690

May3,200                                 400

June4,900                                 700

July4,100                                     650

August3,800                                520

September5,100                            680

October4,200                               630

November3,300                            350

December5,860                               720

Question 1: Determine the fixed- and variable-cost components using the high-low method.

Question 2: What electricity cost does the cost equation estimate for a level of activity of 500 machine hours?

Question 3: By what amount does this differ from March's observed cost for 500 machine hours?

Question 4: What electricity cost does the cost equation estimate for a level of activity of 700 machine hours?

Question 5: By what amount does this differ from June's observed cost for 700 machine hours?